Moving back to the farm? 4 big questions to answer first
The adult kids are moving back to the farm, but has everyone taken time to understand what that means – personally and for the farm business?
The move home means having direct conversations about money, lifestyle expectations and retirement.
According to Annessa Good, an FCC Business Advisor and transition specialist, addressing details of the change of dynamics before the younger generation comes back to the farm is critical to the farm business’s viability, and familial relations.
The move home means having direct — and potentially uncomfortable — conversations about money, lifestyle expectations and retirement.
In Good’s experience, the “kids” coming back to the farm are often in their 30s or 40s and return to their roots after working in established careers with structured work hours, meeting times, vacation allotments and scheduled lunch breaks. That means they tend to look at the farm through this lens.
Good says both generations should keep the following in mind:
Younger generation may bring more formal business practices to the farm, which could improve the farm’s operation efficiency
Older generation may be resistant to more formality
Both generations should work to consider each other as business partners
Younger generation should be aware of the risks and sacrifices of moving away from an established, steady career
Both generations should establish what’s viable before the younger generation moves back to the farm or gives up an off-farm job
“The farm is a lot different than a job in an urban centre. Are they aware of the debt and sacrifices which might be required, or that they might have less disposable income or time off?”
For Bayden Hamilton and his fiancé Tara Katamay Smith of Olds, Alta., reviewing multiple years of financial statements was a critical early step before deciding to return to the family farm. Doing so painted an accurate picture of the business’s success, as well as what he could expect financially.
“My mom sent us any information that we wanted to see and made sure we understood what each line meant. This helped us understand how our income needs would be met and how they compared to what we were used to,” Hamilton says.
“It was also very important to us to know that we were stepping into a viable business and what the financial implications would be by either continuing with existing operations or modifying operations to meet our vision for the farm.”
Establishing who will live where is critical. Before selling or moving from an urban home, Good says the incoming party needs to know:
If there’s a spare lot to live on. That is, is there any room on which to build another residence?
If there’s only one residence like the family homestead, will investments in the business mean future ownership of the house?
Good says establishing a long-term lifestyle and residential goals is a necessity. That means addressing:
Where people want to live
Whether new constructions or upgrades are viable
Actual costs of living on the farm
What everyone wants for the next part of their lives
Older generation’s retirement requirements
“Residences are one of the most emotionally fueled topics because we are talking about memories, the future, security,” says Good. “We have to remember it’s still a huge component of capital purchases and fiscal realities.”
There also needs to be enough time for knowledge transfer. Expectations around initial working roles within the business, and how those roles could evolve as the younger generation learns should be discussed.
“If you only drove the combine a couple of times a year, do you truly understand the agronomy? If you’re coming home at 35, and Mom and Dad are 55, is there enough time to transfer skills?” says Good, reiterating learning periods also provide opportunity to explore new business ideas.
Even the best transition plans don’t always work in the end, but Good believes farm families can still take steps to ensure they and the business can emerge in a positive place:
Access outside help via advisors which can help resolve issues and clarify whether the business can meet personal expectations
Set a timeline where the younger generation participates in the farm before making the final go-or-stay decision
Track all monetary contributions and payouts
Good says the incoming party must understand they may take a financial hit if the farm relationship doesn’t work out.
“Business governance will help protect the farm and ease anxiety,” Good says.
Leaving an urban job to move back to work on the farm can be an exciting prospect. Still, important considerations about money, lifestyle expectations and retirement should be addressed before handing in a resignation letter at the office.
Article by: Matt McIntosh